First Home Owners Grant and Who Benefits From It

What is First Home Owners Grant (FHOG)? Using an appropriate diagram, explain who benefits from FHOG- is it buyer or seller?

The provision of affordable housing is a contemporary problem that successive Australian governments have long grappled with over the past decade. In particular, homeownership has emerged as an area of interest for policymakers keen on transforming the experience of first-time homeowners. Federal and state governments currently implement the First Home Owner Grant (FHOG), introduced in early 2000, and originally meant to serve as a direct subsidy.  It was further revamped as part of an economic stimulus package, offering a one-off grant to prospective homeowners who fit the eligibility criteria provided.  Individuals planning to purchase or construct new homes would be eligible for a $14,000 grant while those buying built homes would receive $7,000 (Australian Bureau of Statistics, 2017). Typically, state agencies require applicants to prove they are buying or building a home for the first time while applying as individuals and not on behalf of a trust. They must also verify their status as permanent Australian residents above 18 years of age.  It is also important to acknowledge the impact of the Goods and Services Tax (GST) and its role in the introduction of the First Home Owner Grant (FHOG). The high cost of buying and building a home prompted the Australian government to introduce the latter as a strategy aimed at stimulating the metropolitan housing market after the Global Financial Crisis of 2008.

Both buyers and sellers benefit equally from the First Home Owner Grant (FHOG). The introduction of FHOG in 2000 was initially designed to function as a subsidy for any eligible Australian seeking to own a home for the first time. Policymakers and economic pundits both projected that its introduction would have a positive effect on the economy due to its deliberate design.  The Australian government essentially introduced the FHOG to target real-estate consumers. It was a strategy whose ultimate objective was to stimulate growth in the housing sector, renowned for being a principal contributor to the Australian economy. Subsidies such as the FHOG provided a level of relief to consumers by reducing the price they initially had to pay for property. The introduction of grants in the housing sector also increased real estate demand by first-time buyers. As a result of this intense campaign to accord first-time owners a unique opportunity to own property, housing stocks rose considerably. As portrayed in Figure 1.0, Pb denotes the reduced price that consumers enjoyed while Ps indicates an increase in housing stock for sellers. It is critical to note that benefits may shift back and forth between sellers and buyers depending on the elasticity of demand and supply. Thus, the introduction of grants resulted in affordable housing for buyers while increasing the property value for sellers.

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